Market Value: It’s Not As Scary As It Sounds.

by David Klemke on June 24, 2010

As an IT contractor I’m really just another faceless item in the meat market of IT skill sets. Every 6 months or so I’m usually in the midst of a couple of hundred other contractors all of whom are looking to either extend their current contracts or are dutifully lining up for each new job that comes along so that our prospective employers can look us over and select the best one of the lot to throw to their various project wolves. We’re still treated like real employees for the most part but we trade off things like on the job training and annual leave for the almighty dollar, usually in the hopes of coming out better off overall at the end. Consequently we’re slaves to the market as for every person that’s charging X to get Y done there’s a slew of them who will do it for a fraction less and coupled with the Gershon report there’s every chance you’ll be usurped by one of them before you know it.

Market value is the key metric by which us contractors define what rate we charge our employers. It’s a rather complicated metric to define as there’s no definitive source of contractor rates (although contracting agencies do have some on their own contractors) so for the most part it’s done on secondhand information, industry rumors and a whole swath of guesswork. Still for any given position you can come up with a reasonably good figure for how much someone in that position would be charging give or take about 10%. Of course budgets play a big part in what people are willing to pay for certain types of work meaning in places like Canberra when the end of financial year comes around we’d start to see an upward trend in rates as all the government departments spend all the leftover dollars they have.

However the term market rate doesn’t seem to apply if you’re looking to extend your contract. Now I’ve been through a few of these myself and every single time when I’ve asked for a rate increase I’ve been knocked back. I can lay a fair amount of the blame squarely at the Gershon report for that as it was responsible for devastating the contractor market initially and continues to keep our rates in check. That’s not a particularly bad thing as for a long time departments were hiding large staff costs by using contractors (our cash comes from another bucket) and the Gershon report forced them to come clean on the matter. Still when you get someone in a position and they’re doing the job aptly it makes sense to keep them at their market rate, lest they start eying off positions elsewhere. Contractors by definition are not bound to any employer and are more than happy to wear the risk of being unemployed if they feel a better deal is to be had elsewhere.

You could write that off by saying that my market rate was what they were paying me in the first place but unfortunately after leaving a previous contract and gaining the rate rise I had originally requested I knew this not to be the case. Granted at the time they had told me that they wouldn’t extend me (I had completed all the work they needed me for and I saw this coming months out) but after landing the new position they asked to retain me at the same rate, fully knowing I had already sourced employment elsewhere. My last request for a rate rise was also rejected purely on the basis of the Gershon report. I was willing to wear that one though as I’d only been there for 6 months.

I can understand the reasoning behind wanting to keep costs low as any department caught spending big on contractors doesn’t look particularly good. Still research shows that replacing an employee will cost you about 1.5 times their current salary meaning that the paltry increases that they may be asking for above CPI are mere peanuts. I have yet to find any organisation that understands this as most, whilst disappointed to lose good staff, have never made a concerted effort to retain me. Many would argue that my now long list of past employers would be a detriment to finding future work, but they’ve been saying that since I started job 3.

Maybe I’m just bitter about having to jump jobs every year because my current employers never want to give me a raise, but talking with my other contractor buddies it doesn’t seem to be isolated to just me. I turned to contracting over 2 years ago as it suited my style of work and with the hopes that my employers would then recognize the value I was providing. More and more it seems though that I’m just another employee paid from another bucket of money and if I believe that I’m worth more than what they’re paying me for my best bet to realize that is to continue the ship jumping I’ve been doing for the past 6 years. It’s quite possible that I’m just one greedy son of a bitch but my long list of satisfied customers would appear to say that I just severely underestimate my own self worth.

Yet another reason on the towering pile to get into business for myself, then I only have myself to blame if I don’t get paid enough. 😉